The army of retail investors that mushroomed during the pandemic has been relentlessly buying the dip in technology stocks for almost two years.
They cheer each other for their diamond hands, that is, their ability to hold onto assets and stay committed to the market, no matter what.
Over the last couple of weeks, cracks have been showing in those diamond hands.
The dramatic fall in shares of tech companies has hurt amateur investors. They are more reluctant to follow the pattern of snapping up stocks such as chipmaker Nvidia.
The tech-laden Nasdaq 100 index has fallen more than 10% this year, as investors braced for the Federal Reserve to turn off the stimulus taps in a bid to tackle red-hot inflation.
Ben Onatibia, senior strategist at data company VandaTrack, said in a note this week that there have been signs of retail capitulation.
Vanda data showed that individual traders sold Nvidia and other chipmakers on net last Thursday and Friday, a departure from their behavior during previous tumbles.
Retail investors have been equally reluctant to buy the dip in other risky pockets of the equity market.
He said that special purpose acquisition companies and Ark Invest's tech-focused innovation fund have not seen much demand from retail investors.
The investment chief of U.S. investment bank identifies four critical tech industries to buy after the correction.
Retail investors are still buying even if they are less enthusiastic. Their focus seems to have shifted a bit.
The data from Vanda showed amateur traders put in almost $2 billion into the stock market on Tuesday.
Ben Laidler, global markets strategist at eToro, said that the trading platform's users have been investing in energy and real estate as they worry about inflation.
He told Insider that he has seen a small shift away from tech.
That is in line with Vanda's data. Retail investors have been chasing rallies in value sectors.
Wall Street has doubts as to whether the retail crowd can be relied on to support the market in 2022, as they have done throughout the coronaviruses epidemic so far.
In the fourth quarter, monthly active users on the popular trading app fell to 17.3 million from 18.9 million in the previous three months.
The younger, smaller investor that HOOD so efficiently acquired in 2021, is moderating his/her activity, according to a post-earnings note.
Retail traders are being tested by the Fed's plans to hike interest rates.
Analysts say amateur investors will be a force in the market for a long time. They might not have the same impact as they did a year ago, when they sent GameStop skyrocketing and kicked off the meme stock craze.
The rise of retail is more structural than people think, according to eToro's Laidler.
It's free trading, fractional ownership, online communities, and low interest rates, regardless of what.
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